The dollar retreated on Wednesday after Democrats won control of both chambers of Congress in the US midterm elections. The euro climbed to its highest since October 6, while expectations for a December Fed rate increase held firm.
The dollar retreated on Wednesday but stayed above its earlier lows. A sweeping Democratic victory in the US midterm elections removed a source of uncertainty for the market, while investors weighed the potential for regulatory changes.
Euro climbs as the dollar index falls
The dollar index fell 0.25% to 101.60 after earlier dropping to 101.21, its lowest since September 30. The euro, meanwhile, rose 0.21% to $1.1217 after climbing to $1.1272, its highest since October 6.
Erik Bregar of Silver Gold Bull in Toronto linked the move to risk appetite. According to Bregar: "when we see risk-on across the board, that's broadly dollar negative." Bregar said markets were relieved that Trump would not fight the result.
Fed rate path stays intact
Despite the political shift, expectations for the Federal Reserve's interest rate path remained largely intact. Markets are pricing in an 81.2% chance of a rate increase of at least 25 basis points at the December meeting, according to CME FedWatch, up from 77.4% in the prior session.
US data added to the mix. The ADP report showed private payrolls rose by 86,000 jobs in October, above the 69,000 estimate of economists polled by Reuters. The ISM non-manufacturing PMI dipped to 54.5 from 54.9 in September, slightly below the 54.8 estimate but above the 50 threshold that signifies expansion.
Sterling and yen move against the dollar
Sterling gained 0.38% to $1.3462 after touching a more than seven-week high of $1.3503 ahead of the Bank of England's policy announcement on Thursday. Against the Japanese yen, the dollar weakened 0.14% to 158.43.
The government's payrolls report on Friday will close out this week's run of US labor market data.
Source: Reuters via Investing.com
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